South African terminal operator Sunrise Energy has awarded local firm EML Energy a 24-month storage contract at its 210,000 t/yr LPG import facility at Saldanha Bay.
Eight companies participated in Sunrise's bidding process, of which five opted to proceed to full evaluation. After "a comprehensive vetting process," EML emerged as the preferred bidder, Sunrise's chief executive Rajen Singh told Argus. The contract will begin on 1 January 2025.
EML aims to use the opportunity "to enhance its supply chain efficiency, expand its reach and solidify relationships with wholesalers and end-users," it said.
Sunrise's facility is the Western Cape's only LPG import terminal, and the province is almost entirely reliant on imports because local refineries are unable to meet demand.
EML replaced Vitol's local unit Vita Gas as the Western Cape's sole importer in June 2023, since when it has imported to Saldanha Bay on a temporary basis. Sunrise launched an invitation-only bidding round to find a new long-term supplier after EML's agreement ended in December 2023.
Wholesalers in the province served by Sunrise's terminal have said they have to pay significant premiums since EML took over. This has pushed regional prices above the government-regulated maximum refinery gate price (MRGP), prompting the department of mineral and resources energy (DMRE) to review the formula it uses to determine domestic LPG prices. It currently uses Saudi state-controlled Aramco's monthly contract prices (CP) and Argus' Ras Tanura-Richards Bay freight assessment to generate an import parity price.
EML sells at about $280-320/t above the Aramco CP, while the MRGP is only around $160/t above the CP, a local trader said.
The firm also varies prices between buyers and has no transparent methodology, revealing prices after the MRGP is published each month, according to a wholesaler that paid a premium of more than R2/kg, or around 14pc above an MRGP of R14/kg, last month.
"Nothing justifies such a high premium", the wholesaler said. The price could be "optimised" through long-term contracts and by using a supplier with a sizeable footprint in multiple locations.
EML said the MRGP as calculated by the DMRE does not include factors and circumstances such as demurrage and freight costs specific to the LPG terminal in Saldanha Bay.
"DMRE is aware of this problem and is better placed to comment on this issue," EML said.
DMRE deputy director of minerals and petroleum regulation Tseliso Maqubelo told Argus Saldanha is costlier than Richards Bay — where the Petredec-Bidvest 22,600t LPG terminal is located — because the size of vessel it can accommodate is much smaller.
However, some LPG operators in the region have questioned the motivation behind EML's appointment given it has no operational experience and is unable to secure long-term agreements, which forces it to buy more expensive spot supply.
At least one wholesaler with an international trading arm, which said it could bring LPG into the Western Cape in full compliance with the MRGP, took part in Sunrise's bidding round but was rejected. Another withdrew its bid because it found the process was not transparent.
A second LPG import terminal will add competition once state-owned Strategic Fuel Fund (SFF) completes a pipeline to LPG supplier Avedia Energy's 2,000t storage facility in Saldanha Bay.
A tender process to appoint a construction company for the pipeline is underway and work is expected to start in the first quarter of 2025, said the SFF, which acquired a 60pc stake in Avedia last year.
The pipeline is expected to be completed by around August 2025, said Avedia chief executive Atose Aguele. This will allow initial imports of about 5,000-6,000 t/month, he said.
